Foreign money to the rescue

Just two years ago next month, an offer by Dubai Ports World to manage port facilities in New Jersey, New York and elsewhere across the country was met with an uproar. Protectionists fretted that port security could be compromised if the ports were run by Arabs, and the deal for DPW to buy the British firm that ran the ports was scuttled.
Far fewer people are whimpering now that Abu Dhabi, China, Kuwait, South Korea and others are jumping in to save U.S. banks still reeling from the subprime mortgage fiasco. Citigroup and Merrill Lynch, both of which continue to write down huge losses, have accepted something like $21 billion from sovereign wealth funds -- the nationally owned savings of developing countries -- awash with money from exports and $100-a-barrel oil.
True, Democratic presidential candidate Hillary Clinton said last week that the U.S. needs more control over the sovereign funds. In general, though, desperation has made banks and their customers eager to embrace deals like those of Citigroup and Merrill Lynch, which the Financial Times described as "the biggest-ever single transfer of capital to U.S. banks from abroad."

Is foreign investment a bad thing? It is not.
For one thing, it's the way free markets work. For another, American debt and the banking debacle have made it necessary. Countries like China and the Arab nations, which have stockpiled dollars, are investing in, and rescuing, the U.S. economy -- at least in the short term. Without changes in the mortgage industry and in American patterns of spending, the benefit of any investments will be eroded.
Clinton is not wrong, however, to point out dangers of the sovereign wealth funds. Because they are run by countries, they could be used to affect foreign policy or manipulate markets -- although there is little evidence of that so far. They are also unaccountable, without shareholders to report to.
Politicians like Clinton, and others, are calling for greater transparency by the sovereign funds, and they are right. There's no reason they shouldn't issue annual reports revealing their holdings and objectives.
Right now, with U.S. companies in such bad need of capital, it's not likely the West has much leverage to persuade the sovereign funds to play ball. Over time, though, that will shift, and the sovereign funds' stake in Western markets will likely push them to accommodate a different set of rules and expectations. Perhaps Dubai Ports World wants to try for another deal?